Correlation Between First Trust and SPDR ICE

Can any of the company-specific risk be diversified away by investing in both First Trust and SPDR ICE at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining First Trust and SPDR ICE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Trust Preferred and SPDR ICE Preferred, you can compare the effects of market volatilities on First Trust and SPDR ICE and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in First Trust with a short position of SPDR ICE. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and SPDR ICE.

Diversification Opportunities for First Trust and SPDR ICE

0.9

Correlation Coefficient

First Trust  SPDR ICE

Almost no diversification

The 3 months correlation between First and SPDR is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Preferred and SPDR ICE Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR ICE Preferred and First Trust is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on First Trust Preferred are associated (or correlated) with SPDR ICE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR ICE Preferred has no effect on the direction of First Trust i.e., First Trust and SPDR ICE go up and down completely randomly.

Pair Corralation between First Trust and SPDR ICE

Considering the 90-day investment horizon First Trust Preferred is expected to generate 0.43 times more return on investment than SPDR ICE. However, First Trust Preferred is 2.32 times less risky than SPDR ICE. It trades about 0.35 of its potential returns per unit of risk. SPDR ICE Preferred is currently generating about 0.13 per unit of risk. If you would invest  1,728  in First Trust Preferred on May 12, 2025 and sell it today you would earn a total of  72.00  from holding First Trust Preferred or generate 4.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

First Trust Preferred  vs.  SPDR ICE Preferred

First Trust Preferred

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Preferred are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, First Trust is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

SPDR ICE Preferred

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR ICE Preferred are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, SPDR ICE is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with First Trust and SPDR ICE

The main advantage of trading using opposite First Trust and SPDR ICE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, SPDR ICE can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in SPDR ICE will offset losses from the drop in SPDR ICE's long position.

The idea behind First Trust Preferred and SPDR ICE Preferred pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.